Paduda: Predictions for Work Comp in 2018

Monday, January 8, 2018 | 0

Good to be back at work — and ready to opine on what 2018 holds for work comp. Here, in no particular order, are my educated guesses, considered opinions and wild-assed speculations.

Joe Paduda

1. Mergers and acquisitions — specifically big deals — will increase.

I expect we’ll see more very large transactions this year, mostly driven by strategic purchases of other companies. Work comp is a very mature industry, scale and size matter a lot, and that means getting bigger is key. Expect to see several billion-dollar plus deals in the service sector.

2. The market will stay soft.

Claims frequency continues to decline, medical costs are pretty much under control, margins are healthy and there’s still a lot of allocable capital in the industry. Unless there’s some major — as in huge — crisis, I don’t expect a hardening of the work comp insurance market.

3. Cost containment’s focus will shift to facilities and hospitals.

Hospitals are increasingly vulnerable due to consolidation among payers, reductions in governmental program funding (thank you, Trump tax bill), changes to Medicare reimbursement, and the systemic shift of care to lower-cost settings. Facilities have already, and will continue, to look for revenues from payers less able to reduce reimbursement. That’s us, kids. Expect to see payers more closely analyzing facility costs, looking for solutions and implementing programs focused on the issue.

4. TPA growth will accelerate ...

... driven primarily by work comp insurers’ outsourcing. With a soft market, there’s little incentive for employers to self-insure, but the long-term decline in claims frequency is driving down insurer claim counts. Some insurers are making the strategic decision to shift claims to reduce fixed costs and capital investment requirements. Expect the big four third-party administrators to add significant new business from insurance companies and similar entities.

5. Tele-everything will take off.

Teletriage, telemedicine, telerehab, etc., is going to grow quickly. Expect lots of activity from companies big and small. Concentra, MedRisk (HSA client), CHC Telehealth, Coventry, Work Comp Trust of Connecticut and others are pushing this care delivery model hard, as they should. Expect that thousands of “visits” will logged by the end of 2018.

6. Claims counts will bump up ...

... in hurricane-ravaged Puerto Rico, Florida and Texas. Alas, a lot of injuries and illnesses will go unreported as unscrupulous companies hire day laborers and don’t insure them, or, in Texas, where work comp isn’t required.

7. But frequency will continue to decline, and total claims will, too ...

... because a) frequency almost always declines, and b) we are at, or very close to, full employment, so a growth in employment won’t counterbalance structural decreases in frequency.

8. Work comp medical costs will increase slightly.

On a per-claim basis, expect that costs were slightly higher in 2017 than the previous year. Per-claim figures are the best measure, although total medical spend is helpful as well. Kathy Antonello will tell us at NCCI’s Annual Issues Symposium in May.

9. Innovative new approaches to financing work comp risk will emerge.

Variations of peer-to-peer such as Lemonade, some enabled by blockchain technology, will gain a toehold in a few states. Don’t expect there to be a major move just yet, as the regulatory, capital requirements and distribution channels are going to adapt slowly. That said, there’s just too much opportunity to reduce costs inherent in the inefficient administrative processes in today’s workers’ comp system.

10. Payroll fraud incidents and other even more creative efforts to screw workers will increase.

I’ll be looking at this in detail, but one quick take is that the number of “contingent workers” in many industries has grown dramatically. The biggest increases? Farming, fishing forestry; logistics; personal care; protective service; education; and training. The implications for comp are deep and broad — lower premiums, claiming incentives, fraud.

I know, there are implications aplenty for claims, occupational injury rates and the like.

Joe Paduda is co-owner of CompPharma, a consortium of pharmacy benefit managers. This column is republished with his permission from his Managed Care Matters blog.